The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2015 Assets Cash $ 65,000 Accounts receivable 437,760 Raw materials inventory 90,200 Finished goods inventory 308,028 Total current assets 900,988 Equipment, gross 630,000 Accumulated depreciation (165,000) Equipment, net 465,000 Total assets $ 1,365,988 Liabilities and Equity Accounts payable 204,500 Short-term notes payable 27,000 Total current liabilities $ 231,500 Long-term note payable 515,000 Total liabilities 746,500 Common stock 350,000 Retained earnings 269,488 Total stockholdersâ equity 619,488 Total liabilities and equity $ 1,365,988
To prepare a master budget for April, May, and June of 2015, management gathers the following information.
a. Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; July, 22,800. Sales of 255,000 units are forecasted for the entire year. The productâs selling price is $24.00 per unit and its total product cost is $19.30 per unit.
b. Company policy calls for a given monthâs ending raw materials inventory to equal 50% of the next monthâs materials requirements. The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
c. Company policy calls for a given monthâs ending finished goods inventory to equal 70% of the next monthâs expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy.
d. Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour.
e. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is treated as fixed factory overhead.
f. Sales representativesâ commissions are 10% of sales and are paid in the month of the sales. The sales managerâs monthly salary is $4,500.
g. Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% monthly interest on the long-term note payable.
h. The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
i. All raw materials purchases are on credit, and no payables arise from any other transactions. One monthâs raw materials purchases are fully paid in the next month.
J. The minimum ending cash balance for all months is $55,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
K. Dividends of $25,000 are to be declared and paid in May.
l. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.
m. Equipment purchases of $145,000 are budgeted for the last day of June.
Required: Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar:
Cash budget.
Calculation of Cash receipts from customers: April May June Total budgeted sales Cash sales 20% Sales on credit 80% Total cash receipts from customers April May June Current month's cash sales Collections of receivables
ZIGBY MANUFACTURING Cash Budget April, May, and June 2015 April May June Beginning cash balance $65,000 $154,016 $217,046 Cash receipts from customers 547,200 514,560 417,600 Total cash available 612,200 668,576 634,646 Cash disbursements: Payments for direct labor 99,220 114,950 125,730 Payments for variable overhead 37,884 43,890 48,006 Sales commissions 54,720 38,400 55,200 Sales salaries 4,500 4,500 4,500 General & administrative salaries 27,000 27,000 27,000 Long-term note interest 3,090 3,090 3,090 Dividends 25,000 Loan interest Payments for raw materials Purchases of equipment Total cash disbursements 226,414 256,830 263,526 Preliminary cash balance Ending cash balance Loan balance April May June Loan balance - Beginning of month Additional loan (loan repayment) (27,000) Loan balance - End of month
Budgeted income statement for the entire first quarter (not for each month separately).
ZIGBY MANUFACTURING Budgeted Income Statement For Three Months Ended June 30, 2015
Budgeted balance sheet.
ZIGBY MANUFACTURING Budgeted Balance Sheet June 30, 2015 Assets Liabilities and Equity Liabilities Stockholders' Equity
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015: |
ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2015 | |||||
Assets | |||||
Cash | $ | 65,000 | |||
Accounts receivable | 437,760 | ||||
Raw materials inventory | 90,200 | ||||
Finished goods inventory | 308,028 | ||||
Total current assets | 900,988 | ||||
Equipment, gross | 630,000 | ||||
Accumulated depreciation | (165,000) | ||||
Equipment, net | 465,000 | ||||
Total assets | $ | 1,365,988 | |||
Liabilities and Equity | |||||
Accounts payable | 204,500 | ||||
Short-term notes payable | 27,000 | ||||
Total current liabilities | $ | 231,500 | |||
Long-term note payable | 515,000 | ||||
Total liabilities | 746,500 | ||||
Common stock | 350,000 | ||||
Retained earnings | 269,488 | ||||
Total stockholdersâ equity | 619,488 | ||||
Total liabilities and equity | $ | 1,365,988 | |||
To prepare a master budget for April, May, and June of 2015, management gathers the following information. |
a. | Sales for March total 22,800 units. Forecasted sales in units are as follows: April, 22,800; May, 16,000; June, 23,000; July, 22,800. Sales of 255,000 units are forecasted for the entire year. The productâs selling price is $24.00 per unit and its total product cost is $19.30 per unit. |
b. | Company policy calls for a given monthâs ending raw materials inventory to equal 50% of the next monthâs materials requirements. The March 31 raw materials inventory is 4,510 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials. |
c. | Company policy calls for a given monthâs ending finished goods inventory to equal 70% of the next monthâs expected unit sales. The March 31 finished goods inventory is 15,960 units, which complies with the policy. |
d. | Each finished unit requires 0.50 hours of direct labor at a rate of $11 per hour. |
e. | Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $4.20 per direct labor hour. Depreciation of $35,020 per month is treated as fixed factory overhead. |
f. | Sales representativesâ commissions are 10% of sales and are paid in the month of the sales. The sales managerâs monthly salary is $4,500. |
g. | Monthly general and administrative expenses include $27,000 administrative salaries and 0.6% monthly interest on the long-term note payable. |
h. | The company expects 20% of sales to be for cash and the remaining 80% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale). |
i. | All raw materials purchases are on credit, and no payables arise from any other transactions. One monthâs raw materials purchases are fully paid in the next month. |
J. | The minimum ending cash balance for all months is $55,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance. |
K. | Dividends of $25,000 are to be declared and paid in May. |
l. | No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter. |
m. | Equipment purchases of $145,000 are budgeted for the last day of June. |
Required: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar: Cash budget.
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Budgeted income statement for the entire first quarter (not for each month separately).
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Budgeted balance sheet.
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